“You’ll recall that in late December, when a special committee of independent Apple directors exonerated CEO Steve Jobs of any wrongdoing in connection with the options backdating that it admitted had occurred at that company, it stressed, among other things, that Jobs had not ‘financially benefited’ from any of the backdating,” Roger Parloff blogs for Fortune.
ParloffOthers have already questioned the special committee’s interpretation of financial benefit (see, e.g., this Washington Post article, focusing on the fact that the options were later exchanged for 5 million shares of restricted stock), and I have previously argued (here) that whether someone ultimately succeeded in realizing a financial benefit is irrelevant to the question of whether he attempted or conspired to violate various securities, tax, or accounting laws or rules.”
Parloff writes, “But there’s a simpler reason, still, that, I think, Jobs did “financially benefit” from some of the backdating at Apple. It stems from a very unusual fact about Jobs’s two enormous options grants, which I only stumbled on recently when re-reading some of his SEC filings: large portions of each grant vested immediately.”
Full article here.
Related articles:
SEC weighing whether companies and shareholders were hurt by backdating options – March 08, 2007
More charges likely in stock options backdating cases – March 04, 2007
SEC won’t bring charges in all options backdating cases – February 12, 2007
Report: Steve Jobs signed off on Pixar deal with backdated options for Lasseter – February 10, 2007
Apple CEO Steve Jobs questioned in options backdating probe – January 23, 2007
Lead prosecutor in Apple options investigation leaves fed post to join private law firm – January 22, 2007
US Attorney Kevin Ryan resigns: What it could mean for Apple – January 18, 2007
Steve Jobs worth $20 billion to Apple Inc. – January 17, 2007
Report: Apple axed lawyer who worked on Steve Jobs’ stock-option grant – January 05, 2007
RUMOR: Steve Jobs will take leave of absence from Apple Computer – January 05, 2007
Apple CEO Steve Jobs getting special treatment in options backdating scandal? – January 04, 2007
Could Apple thrive without Steve Jobs? – January 04, 2007
Apple stock-option fallout: investor lawsuit and twin U.S. gov’t investigations – January 04, 2007
WSJ: Steve Jobs, backdating miscreant – January 03, 2007
Should Steve Jobs be allowed to survive Apple’s options backdating scandal? – January 02, 2007
Apple options probe shines spotlight on former execs Anderson and Heinen – January 02, 2007
ThinkEquity analyst: Apple sell-off due to ‘inexperienced traders,’ nothing new in options story – December 28, 2006
Analyst: U.S. Gov’t unlikely to ‘nail Apple and Steve Jobs’ – December 28, 2006
Report: Apple ‘falsified’ records on 7.5m stock options granted to CEO Steve Jobs in 2001 – December 28, 2006
What would Apple be worth without Steve Jobs? – December 27, 2006
Piper Jaffray: Steve Jobs not at risk in stock options case – December 27, 2006
Apple shares push into positive territory, top NASDAQ most-active list – December 27, 2006
Shares of Apple Computer fall 5% in pre-market trading – December 27, 2006
Faked documents may be at core of Apple options probe; Jobs seeks outside legal representation – December 26, 2006
Apple delays filing annual report due to ongoing stock options investigation – December 15, 2006
Options scandal: is Apple’s Steve Jobs truly safe? – October 18, 2006
Apple Computer Directors may have had conflicts of interest in options investigation – October 11, 2006
Apple’s options disclosures leave plenty of unanswered questions – October 09, 2006
Apple shareholders await earnings restatements; Steve Jobs still not in the clear – October 06, 2006
Former CFO Anderson helped turn Apple Computer around – October 05, 2006
Wall Street unshaken by results of Apple stock options investigation – October 05, 2006
Is Apple rotten at the core? – October 05, 2006
Analyst: Anderson, Heinen may be former Apple executives responsible for irregular options grants – October 05, 2006
Analyst: Apple restatement due to options irregularities not expected to be significant – October 04, 2006
Apple’s special committee reports findings of stock option investigation – October 04, 2006
Google CEO declines Apple automatic stock option grant; plans to buy 10,000 AAPL shares instead – September 01, 2006
Google CEO Dr. Eric Schmidt joins Apple’s Board of Directors – August 29, 2006
Shareholders allege Apple execs reaped ‘millions’ in unlawful profits – August 23, 2006
How options-backdating irregularities can affect your Apple Computer stock – August 23, 2006
Apple’s options imbroglio: Mac-maker granted options at or near key events in company’s history – August 18, 2006
Apple added to Nasdaq’s list of ‘delinquent companies’ – August 18, 2006
Apple unlikely to be delisted by NASDAQ – August 16, 2006
Apple CEO Steve Jobs drawn into stock options scandal – August 15, 2006
Apple announces update regarding stock option grants – August 11, 2006
As expected, Apple delays quarterly results due to stock-options grants review – August 11, 2006
Some stock options grant decisions were made by Apple board, and potentially, CEO Steve Jobs – August 10, 2006
Disney: no material impact from Pixar options – August 09, 2006
Pixar options draw scrutiny – August 08, 2006
Apple stock options scandal? What scandal? – August 07, 2006
Class action lawsuit over stock options filed against Apple Computer, Inc. – August 04, 2006
Wall Street forgiving of Apple’s stock option irregularities; CEO Jobs unlikely to be terminated – August 04, 2006
Apple’s stock option irregularities escalate into a scandal as world awaits Steve Jobs’ WWDC keynote – August 04, 2006
Apple warns of profit restatement dating back to 2002 – August 04, 2006
Apple loses 3.5% to $67.15 in premarket trading – August 04, 2006
Apple announces update regarding stock option grants – August 03, 2006
Shareholder’s options suit against Apple alleges ‘striking pattern that could not have been chance’ – July 11, 2006
Apple announces update regarding stock option grants – July 05, 2006
UBS: stock options probe unlikely to hurt Apple – June 30, 2006
Apple joins growing list of companies entangled in stock option ‘irregularities’ – June 29, 2006
Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006
i thought backdating wasnt in itself illegal…
it was illegal if done incorrectly.. I need a lawyer/accountant to verify/deny that.
The author does make a cogent argument.
Makes sense to me. So, all you financial pages folks, how much would it matter it he did financially gain?
What odds are ya’ll laying for:
Apple is smacked on the wrist.
Jobs is smacked on the wrist.
Apple is whacked.
Jobs is whacked.
Jobs is forced out.
I say cut his salary in half to 50 cents a year and be done with it.
John E…..
I just laughed so hard, I farted!
Whether SJ “benefited” or not is only tangentially related to the question of criminality. Jobs has stated that he didn’t know the accounting implications, which would mean that there was no criminal intent (which is necessary in this type of charge). Whether he benefited is mainly a PR issue, though the prosecutors could also require that he return the money to avoid prosecution if he is determined to have benefited.
My understanding is that backdating is not illegal; not reporting it correctly (I guess to the SEC) is the problem. And of course the root question here is whether the shareholders were hurt. Of COURSE the recipient of the backdated stock is going to benefit financially — that’s the point of the stock grant in the first place. You don’t give someone a stock benefit, backdated or not, to punish them. The real core issue here is the fact that the stock has risen 1700% on Mr. Jobs’ watch… which makes this entire ridiculous “scandal” pretty much a witch hunt.
I think that most Apple customers and stock holders fee that whatever he was paid and however he was paid, we got a good deal. No harm, no foul.
Ugh! That’s ‘stock holders feel’ NOT ‘fee’ – Freudian slip?
Hmmmm. If he did not exercise the options for gain, then he did not benefit. Period. Anything else is politically motivated.
The exchange of options for stock can be evaluated as proper or not, but that was not part of the original issue.
JMHO.
N.
@Jake,
“Jobs has stated that he didn’t know the accounting implications, which would mean that there was no criminal intent (which is necessary in this type of charge).”
I think this is very important here. The thing to remember about SJ is that, unlike many CEOs, he doesn’t have a background in accounting, etc. Remember, he has had ONE semester of college! I doubt that SJ knows all of the specific details regarding the handling of stock options. That’s why he hired Fred Anderson. Some CEOs are very hands on in the accounting practices of the company because they come from that background. I sincerely doubt that SJ is like that.
Jake
I would love for Jobs to weather this nonsense unmarred, but your assumpition that “Jobs has stated that he didn’t know the accounting implications….” implies that he is a man beyond reproach – what would you say in his sneakers if you had known – sure judge I knew…put me away. I don’t know him personally but I have seen people that I thought I knew lie under oath and that was very uncomfortable. As someone an avid Apple fan and one who thinks of Jobs as a modern day Edison I wish him well , but I don’t give Jobs or any othe mortal for that matter a demi-god or god-like qualities.
Let’s hope for the best.
Someone else besides me must have read the article a week or so back that discussed how Jobs options were worth circa $800m after they were rearranged and if they hadn’t been they would have been worth more than 2.5 billion. The writer said Jobs offerd to sell him his options…
I can’t find the article….
HERE YOU ARE: NOW TELL ME IF STEVE JOBS BENEFITED….
http://money.cnn.com/magazines/fortune/fortune_archive/2007/03/19/8402325/index.htm
Oooops..MDN Magic word is..”trial”
norm e has it exactly right.
Also the author if the article linked to by Macaday has done a bit of revisionist history. Jobs’ offer was for much, much less than half of the author claimed the value was.
1) I own Apple shares.
The actual backdating is not illegal, if properly accounted for.
The CFO was fired for not accounting for this properly.
Hasn’t anybody figured out that the 5 major accounting firms were recommending the behaviour at the time?
So, Jobs agrees to $1 per year. We all expect him to receive some form of compensation. He was to receive options.
The profit in question is only the value between the grant date and the date they chose the grant date. Oct to Dec.
The fact that those options were cancelled, does cancel the benefit.
In a case where the CEO was paid $1, you have little trouble convincing anyone that the restricted stock was part of his Base pay value.
The fact that there was a base pay responsibility for the board to conpensate the CEO for leading the company, is not in question. By using immediately vesting restricted stock, it was hardly as lucrative as options or as base pay (no flexibility, but has a tax implication). What if Steve lost interest because the board didn’t pay him anything? There had to be some remuneration for his effort.
Many other major companies have moved to this immediate vesting or near immediate vesting.
If I were the SEC I would have 4 accounting firms painting prison walls for their counselling of how to undermine shareholders, and then missing the accounting on the books. That is the real crime.
As a closing statement, how many non accountants would pick up that backdating is legal and instantly link to how is this accounted for. That is what auditors, lawyers and CFO’s are for.
The original options were cancelled. So should the case against Steve Jobs be. The lawyers, accountants, and auditors, not so much.
Lastly, Fidelity bought 50 million Apple shares in February 2007. Total 5 Billion. Something tells me, their lawyers might have checked this out too.
Magic Word: Move as in we must Move on.
His arguement isn’t making much sense…I’m thinking FUD.
InaChateau,
You continue to ignore the fact that other Apple employees had their stock options cut in half during this growth period to accommodate his Steveness and Ron Johnsons special grants.
Article title asks, “Did Steve Jobs ‘financially benefit’ from backdated options?”
Well, did he? For me the oxymoron in these kinds of articles is the rhetoric. The writer apparently has a new take after going through the SEC filings… So, did he? I mean, this guy is allegedly reading the SEC filings and the best he can come up with is yet another question?
Again, if Mr. Jobs did something illegal, and its proven as fact as opposed to speculated into reality, then he should be justly fined and sentenced, but this kind of guessing and reinterpretting just wreaks of Apple naysaying. Facts are facts, and after all of the facts are in, if there is no actual evidence of wrong doing then we need to move on.
By the way, thanks to Macaday for the link to the CNN article, that is more the Steve that I’ve envisioned:
– He’s at Apple and Disney and etc. to make money.
– Just cause he’s a techno egomaniac doesn’t mean he knows what he’s doing with his money and investments.
– More often than a not smart-alec journalists are just as stupid as the people they are reporting on.
Criminality is not measured by the magnitude of the larceny but rather the act of commission only.
Nothing to see here. Another, no doubt well compensated, MS lapdog spreading FUD. However with Uncle fester at the helm there is little doubt of the eventual course MS will take.
Mark it YAML (yet another microsoft lapdog) and dump the author in the long list of those willing to sacrifice their credibility for MS’s favor.
Speaking of lapdogs did adobe actually get on board with microsfts proprietary image compression scheme???? It is a shame what has become of a once great company (adobe, msoft was never worth a s__t)
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